Town Hall 7/21/05
Forum Link: Original Post Town Hall with Tbone Linden 07/21/2005 Topic: Economics Jeska Linden: Thanks for coming out everyone Jeska Linden: Welcome to the Town Hall with Tbone Linden! We're here today to discuss SL economics. Jeska Linden: First some guidelines for the discussion. We will be focusing this Town Hall on questions about the economy, please don't submit your technical support or other off-topic questions, as they will be skipped over. Jeska Linden: Also, for those who have joined us here in Brampton, I'd like to ask you to please hold down the chat and offers of friendship until after the meeting as it can be distracting. Jeska Linden: Tbone is going to open with a brief introduction and then answer some of the questions which were posted beforehand in the forums. Jeska Linden: Then we will go into an open QA. Questions can be sent to me (Jeska Linden) in the form of an IM. Questions will be answered in the order they appear on my screen. Char Linden: Please no chatting to keep things simple, keep to IMs between yourselves for discussion. Jeska Linden: Tbone, take it away. Tbone Linden: Hi, I'm Tbone Linden (my brother always used to call me that name) Char Linden: we appreciate your help with that Tbone Linden: I think these meetings usually start with some background for you, so let me do that. Tbone Linden: First of all, I wont clam to be very smooth in-world yet, and this is my first town hall. Tbone Linden: There will be some things I may have to go back and spend more time on Tbone Linden: But this is also a great forum to get a sense for what's important for you lately Tbone Linden: In the questions I've heard so far, there's lots of good ideas for us to spend more time on here after this conversation. Tbone Linden: I have been assisting Linden Lab on its real-world financial strategy, and that of course is tied to a healthy in-world economy. Tbone Linden: With over a thousand simulators and counting, there's lots to do these days. Tbone Linden: I used to do debt funding (loans) for small companies, and have managed finances for other companies. Tbone Linden: I have met a great number of entrepreneurs, and know how important it is for a healthy economy. Tbone Linden: And though my linden is only a week old, I have been working with the team for many months Tbone Linden: Spending time on how we get better data for financial decisions, etc. Tbone Linden: Overall I want to let you know how much we think about the economy over here. Tbone Linden: Also how careful we are not to take excessive actions to curtail the growth in this economy. Tbone Linden: our general rule is to change things as little as possible and allow the economy to self-regulate. Tbone Linden: The growth of the economy continues to outpace the user base growth. We are now over 35,000 accounts. Tbone Linden: User-to-User transactions are over US 1.5 million per month Tbone Linden: Transactions and Linden dollars in user-to-user transactions per usage hour have tripled over the past year. Tbone Linden: Put another way, the average user now spends 3 times as much per hour online as last year. Tbone Linden: This means you are building increasingly compelling goods and services, which is very exciting because it means that SL is growing just like a developing nation. Tbone Linden: "Object" sales have risen even faster, about a steady 5x per year increase. Tbone Linden: Sales of goods other than land such as this "object" category gives us a sense that the economy continues to diversify. Tbone Linden: We monitor the level of money supply (stipends and incentives, net of auctions, etc) per new user into the economy and manage it to maintain a stable currency. Tbone Linden: we really have not had to adjust those parameters or programs dramatically to achieve this stability. Tbone Linden: The currency price has not moved more than 7% in the past month ($3.75-4.05 per 1000 lindens), and that seems fairly typical of recent months. Tbone Linden: Average land auction price has returned to a more typical $90 per acre in the past week. Resident in-world sales have generally followed auction prices in the past. Tbone Linden: As you know, there is a wholesale market for new land (auctions and island sales). But there is also a larger and diversified resale market for parcels. Tbone Linden: In June we auctioned 300 acres, in-world resident sales were 1700 acres. In general there has been a 4:1 ratio of auctions to in-world sales. Tbone Linden: Currently there are some 60 user-to-user land sales for every auction sale, and there are currently 562 distinct owners of parcels for sale. So there is more diversity in land sales than may first be apparent. Jeska Linden: We got a few questions in the forums and Tbone will now answer them :) After that, we'll take an open QA Tbone Linden: Sorry for the pace - getting used to the questions part. Tbone Linden: Travis askedd: Has Linden given any thought to making first land remain first land? i.e. - First Land is only transferrable back to the Governor/cannot be resold on the open market? Tbone Linden: He also mentioned the issues related to "gaming" this system with alts Tbone Linden: We do discuss this issue internally a great deal, both the alt issue and the economics of first land. Tbone Linden: Many of you have cussed the economics at some length, and know any potential profit margins on gaming the "alt" system are slim. Tbone Linden: On the "alt" issue, our desire for information protection does make it hard to identify bona-fide "family" accounts versus multiple accounts for other purposes Tbone Linden: But we are constantly monitoring "alt" percentages in every program. Tbone Linden: And we have discussed the option of making it non-resalable. Tbone Linden: An interesting idea would be to have First Land just resalable to other new users Tbone Linden: But we were concerned about areas having permanent First Land? status, and we're not sure that?s best for adjoining parcels. Tbone Linden: One issue in our discussions has been that we really don't like the complexity of having two types of land for users to have to figure out. Tbone Linden: For example, what if you want to join a first land with a non-first land parcel. That would get complicated. Tbone Linden: Oh, let me clarify - back on a point on land prices Tbone Linden: I quoted $90 per acre - its always confusing - an acre is 4096 m2 and the $90 was US dollars Tbone Linden: Sorry, we have those "units" discussions all the time... Tbone Linden: Rayve asked: Is there any plan/possibility of creating more incentive to build creative, attractive locations with PG content or for ppl that cant' afford 3/4 of a sim? Tbone Linden: So far, have tried to encourage economic development without favoring content. Tbone Linden: (this gets to my prior point about interfering as little as possible) Tbone Linden: We think that as technology improves and we roll out higher performance, more games a-la Tringo will be developed independent of any incentives. Tbone Linden: In real-world markets, often new media formats start with a significant proportion of non-PG content Tbone Linden: and then the volume of PG content increases more rapidly over time, as the medium covers a larger portion of the population. Tbone Linden: Though we want to encourage the development of great PG content, we want to be careful not to restrict growth through our own selections of content on the main grid: Tbone Linden: We also haven't been able to think up incentive programs for land that have a process that is both fair and perceived as fair by all residents. Tbone Linden: We are very interested in ideas from users on this. Cases where we are asked to editorially "judge" proposals seem like a bad idea both from a fairness and from a time requirement perspective. Tbone Linden: The next question from Jeffrey related to some very broad issues Tbone Linden: Q: Is the long term goal to place emphasis on a "closed" economy, similar to that of an MMOG, or is LL still pursuing taking their reach to a more global, standard-based perspective? And how much emphasis is being placed on these goals over other priorit Tbone Linden: ...that was "priorities" at the end... Tbone Linden: As Philip and Cory have discussed, we lean toward the more global, standards-based perspective. Tbone Linden: This means that we think having currency prices set by open markets makes sense, for example. It also means that financial institutions might be "private" - ideally coming from residents. Tbone Linden: I think that reporting and rating systems will develop over time to increase confidence in the reporting of other parties, and this will help with the development of capital markets. Tbone Linden: Our ability to track assets and investments will help with the development of markets as well, and help with management of investment and savings rates. Tbone Linden: We have already seen the first "fund" develop, which has a lot of the characteristics of a Real Estate Investment Trust, as Land is a straightforward asset category to track. This is really interesting stuff. Tbone Linden: I am not sure about the other priorities to which the question refers. Tbone Linden: Maybe after Q&A we can talk about other issues that fall into this "open" versus "closed" perspective. Tbone Linden: The next forum question was from Merwan... Tbone Linden: Does LL have any plans to create the option for RL accounts within Second Life? Tbone Linden: I assume RL refers to real-life accounts? This is quite an interesting prospect, one that perhaps was part of the thinking when the company developed the concept of islands. Tbone Linden: Our first goal is to get the tools in user hands that support businesses within Second Life (things like contracts, dispute resolution) Tbone Linden: An architecture that supports certification in Second Life could also be linked to some real-world certifications. Tbone Linden: But we want to be careful not to have LL be in the middle of the regulation, or someone's real-world rating. Tbone Linden: There may be some foundation tools that we could build in to SL capabilities, and service providers could build on working with regulators. Tbone Linden: However, our current priority in this regard is a set of tools would like to provide for in-world businesses. Tbone Linden: Gwyneth asked about Philips quarterly reports and how to keep that information flow... Tbone Linden: We agree this is important and we put some of the economic statistics up on the site now in an automated form, to provide some of this information. It has a lot of history, too. Tbone Linden: The detailed economic stats (amounts and transaction volumes) are now automated and can be found at Tbone Linden: http://secondlife.com/community/economy.php , going back weekly for about a year! Tbone Linden: But let us know what else beyond this you would like to see. I think that's it for the forum questions - Jeska Linden: Burke Prefect: This might not count, but how far are we from seeing PayPal or some other ePayment system? Tbone Linden: Good question. We've been pretty careful on new payment options, but PayPal is one everyone agrees on. I can tell you that we have it in test now - if you want to be part of the test, let us know. Tbone Linden: (The test is working....BTW) Jeska Linden: Jonquille Noir: Does LL have any idea how many residents are exchanging Lindens for real currency, and if so, any kind of average of how much is being exchanged? Tbone Linden: Right, we look at currency transaction, and any "blips" we might see there. I can say that exchange volume is still very consistent. So buyers and sellers are being matched, which is good. Tbone Linden: Any "cash out" we have seen is not a significant portion of exchange volume, and is finding a buyer. Our influx of residents continues to rise. Jeska Linden: Foolish Frost: How much maintenence does the economy need, and how do you go about correcting problems? Tbone Linden: What's fascinating is the stability of this economy. As I mentioned we do monitor our "money supply" into the economy on a per-new-user basis... Tbone Linden: ....but existing programs (incentives, stipends, etc) have kept that consistent. Tbone Linden: And we watch the currency rate on the exchange for the results of that Tbone Linden: Any new programs are evaluated in light of their effect on the money supply. Tbone Linden: We watch land auction and in-world land pricing closely as well Tbone Linden: And as you know we have made some program changes in those areas Tbone Linden: Those are the principal categories we watch, but over time as the economy grows Tbone Linden: We will be able to apply some of the broader macroeconomic equations (savings, investment, government spending, etc..) as I mentioned earlier Tbone Linden: Okay those were variables, but there are equations.... Tbone Linden: Back on the PayPal thing, if you want to be in on the test, you can emial land@lindenlab.com and we'll get it to the right folks (thanks, Jeska....) Jeska Linden: Travis Lambert: There is a lot of uncertainty right now - new auction changes, the recent client hacking - concern over future policy changes with land Tier -- do you recognize this uncertainty, and do you think it has a neutral or negative impact on .. Jeska Linden: ...our economy? Tbone Linden: Understand that we are all here for the long run, that (a) the whole company motivates when a hack occurs, and (b) the policy changes are always evaluated for any impact on the existing audience. Tbone Linden: We make changes to (a) make things easier for the economy to work, and easier for entrepreneurs to make money. Tbone Linden: There's a great deal of behind-the scenes work to get precise data on impact of any program change. Tbone Linden: We have a large "dashboard" of reporting servers, etc to make the huge volumes of data manageable. Jeska Linden: Jazman Kitty: will the stippens go away or be going down any time soon ? Tbone Linden: No plans for that. Tbone Linden: That would change the money supply equation. Jeska Linden: WaySedated Codesmith: the forums are a bit scattered and i've read where people are saying ll is intending to dump lots of land? or possible far too many new sims? i realize this is a very open question but your intention is to keep land worth... Jeska Linden: ..something regardless of land barrons, this is still important yes? that land or realestate has value? Tbone Linden: Yes, very important. I think if you look at the latest changes in recent weeks, they have had a positive effect on land. Tbone Linden: Land is one particular "inventory" asset that is very trackable, so its a good one for us to monitor, and we do, daily. Jeska Linden: StoneSelf Karuna: any chance of switching the economy from toy money (i.e. L$) to some real currency? mediating 1.5 million dollars through toy money seems odd. Tbone Linden: Well, there's a large number of regulatory issues involved in this, and we don't want to slow the growth of the economy at this stage with more admistration..plus the exchanges allow conversion to real money. Jeska Linden: Prokofy Neva: 562 unique sales is not 562 unique people; how many are unique people, and are they forced within 30-60 days to sell back to one unique land baron? Land bought at auction 60 days ago is now half its value for resale in many case Tbone Linden: Let me go back and get you more data. We were very concerned here about the pricing, but I think if you look at ther very recent data after the latest change... Tbone Linden: that the land pricing (at auction) is back up, and that demand for in-world sales has increased. Jeska Linden: Nathan Stewart: Theres always alot of emphasis on people making money, what about the people who treat this as there second life and want to have fun, not get rich, just entertain make a fun place and maybe teach, are there any plans to help .... Jeska Linden: non profit educational places? Tbone Linden: You've hit on the point that there are several audiences - the ones playing for fun, the ones for whom its a "game" to make money, the ones for whom the purpose is to make money... Tbone Linden: ...and the ones for whom the purpose is a social good in the real world. All are important, and there are more. Tbone Linden: Your question is also for the marketing and community team, and I know they are working on on serveral projects with education and nonprofit groups. Tbone Linden: The company takes pride in being of interest in cutting edge education and in SL being for a social good. Jeska Linden: Pendari Lorentz: Do you think the ability for people to have mulitple alts skews the economy numbers any? Tbone Linden: This was a "pet peeve" of mine, but the "alt' numbers have been fairly consistent. As I mentioned earlier, we watch them and pull them out in our analysis to see if it changes the results. Tbone Linden: The challenge is separating alts that were the original objective, from "gaming" alts. Tbone Linden: I can tell you that when we spot an anomaly in the daily data, the CS team jumps to action to see if something is being "gamed" Tbone Linden: But we also up-front do an economic look at whether an alt has an economic incentive.. Tbone Linden: anyway, we keep watching it. Jeska Linden: Hiro Queso: Does LL appreciate that a huge majority of the rental market is based on tier arbitrage, and that a move to a linear tier system would pretty much kill an important part of the economy? Tbone Linden: Good one, Hiro. Arbitrage is a natural part of any economy - stock markets are basically places where arbitrage takes place. Tbone Linden: But of course we'd like to see the "value-add" continue to play a larger role in land businesses. Tbone Linden: And some of that is happening - ways of managing communities, parcelling, etc. Tbone Linden: And we don't want to do things that are jarring to entrepreneurs. Tbone Linden: So we recognize its a part of the economy, and want to support value add. Tbone Linden: Okay, one more question, hope that's ok. Jeska Linden: Nethermind Bliss: hiya! I was wondering if LL would ever consider a 3rd party dispute resolution concept similiar to Square Trade with Ebay for economic dispute resolution :) I think it would pave the way for other types of dispute res. if successful Tbone Linden: Okay, that's one for me to spend more time on. Partly because I know Robin and the team have spent more time on this than I have, so I want to get their input, Tbone Linden: but the other part of that is building trust levels in transactions with new parties before the transaction. So let me get back to you on that. Tbone Linden: Thanks, everyone (I love the new stage!) and thanks for making my first town hall a good experience. Jeska Linden: I'll be posting the transcript to the forums and if you have any more questions, please feel free to post them to the Hotline to Linden in the forums as well :) Char Linden: Thanks ladies and gentlemen for being such a great crowd. =) Category:Town Hall Logs